Ponzi Scams: Madoff Victims to Get $93M, Fraud Lawsuits Name Insurance Brokerage Head in $10M Scheme

Investors who were bilked in Bernard Madoff’s Ponzi scam will be getting back another $93 million. Madoff Trustee Irving Picard said that Defender Limited and related entities have consented to give back that amount, which they received from investing with the Ponzi mastermind. As part of the agreement, the $93 million will be withheld from the over $422 million that Defender is waiting to get back for its own losses in the scam.

To date, Picard has gotten back over $10.6 million of investors’ $17.3 billion in principal. This is the latest deal reached between the trustee and a so-called feeder fund. These funds pooled investor money and then sent the cash Madoff’s way. Bogus returns were issued to the funds, which gave the money to their individual investors.

Picard contended that the parties behind the Defender fund were aware, or if not then they should have been, that Madoff’s company was a fraud. The $93 million is representative of all the money that Defender withdrew from its fund from its formation in 2007 until the end of 2008 when Madoff liquidation proceedings began. As part of the agreement, parties involved with Defender will cooperate with Picard to get back the $550 million. Picard has also reached deals with feeder funds Premo Fund, Herald Fund SPC, and Senator Fund SPC.

In other Ponzi scam news, A number of securities fraud lawsuits have been submitted accusing Loren Holzhueter of racketeering and fraud related to his alleged running of a $10 million Ponzi scam. The 69-year-old was the head of ISC Inc., an insurance brokerage and investment business. Many of his investors were retired and had limited financial resources.

In November, IRS investigators went to Holzhueter’s offices and confiscated records because they suspect him of running the Ponzi scheme. Earlier this year, the U.S. Securities and Exchange Commission sued Holzhueter, his assets were frozen, and a monitor was appointed to take charge of his business.

The SEC claims that Holzhueter lied to investors, who had been allowing him to handle millions of dollars over the last several years. They claim he said that investor funds would be placed in a special investment account and they could take their money out whenever they wanted. Others were purportedly told that their money went into mutual funds, Individual Retirement Accounts, or other investments. Instead, claims the agency, these investments were not executed and investors’ money were mixed in with other ISC revenue.

Now ISC’s investors want their money back. According to the securities cases, they now believe that the regular financial reports given to them by Holzhueter were bogus and that the defendants-Holzhueter’s wife is one of them-misappropriated their funds for their personal use. The SEC said that Holzhueter and his family may have collected over $500,000 from accounts that contained investor money and used some $400,000 for a company that belonged to him. More than 122 investors may be entitled to financial recovery.

Last week, the SEC requested that the district court judge prevent ISC from paying its lawyers because of concerns that the company may not be capable of making any significant lump sum payments. The Commission does not believe that Holzhueter’s lawyers should get preferential treatment when so many others, including creditors and bilked investors, remain unable to get their money back.